Is The Iraqi Dinar Worthless Paper Or Maker Of Millionaires?

Postscript. After reading several good comments on this blog exposing the buy Iraqi Dinar get rich quick scheme as a scam, I want to make it very clear that I also believe it’s a scam. My intent for the original blog was to answer tax questions about holding physical currency as an investment, not to drill down into the Iraqi Dinar scheme. I may do just that in a follow-up post soon. -R.G.

Dozens of people have signed up for tax consultations with me over the years looking for a windfall profit on the U.S. government revaluation of the Iraqi dinars back into U.S. dollars. In other words, these were people holding dinars who were hoping they could exchange them for dollars again.

Most dinar investors are current and ex-military, warzone contractors and now speculators. A cottage industry of promoters has sprung up on the Internet promising dinar “get rich” schemes. Many have invested, say, $5,000 and they hope to make millions. I’ve always thought it was a scam, as it sounded too good to be true.

These people ask me about their potential large tax bills. Most hope for long-term capital gains tax rates, currently up to 15 percent. I have to give them the bad news: holding physical currency is considered ordinary gain or loss in Section 988 (foreign currency transactions). Unlike forex traders, who don’t hold physical currency and don’t take or make delivery, they can’t file a capital gains election to opt out of Section 988 and into short- and long-term capital gains treatment.

That means no lower 60/40 futures tax rate either (Section 1256). At least, it’s not considered a personal loss which otherwise can’t be deducted, as is the case when a person returns from a vacation and exchanges his left over currency from that trip. Investors in dinars can deduct ordinary losses in Section 988, but few expect a loss.

Lords of Finance: The Bankers Who Broke the World by Liaquat Ahamed is about how the four leading central bankers from the U.S., U.K., France and Germany navigated in and out of WWI and financed recoveries and German reparations. These central bankers went off and on the gold and new dollar standards by manipulating their exchange and interest rates and much more. This is how money and power (military and otherwise) go hand in hand.

Our current situation begs the question: Did the Bush administration plan on, and is the Obama administration still considering, paying for part or all of the Iraq war by collecting taxes from the revaluation of the dinar?

If this scheme has any resemblance of reality, it could be an interesting revenue raiser for the government, and I know the government is hunting for revenue raisers and closing of tax loopholes.

Maybe the story here is just that it’s a scam. But, if rumors in the marketplace are true, and the dinar does revalue and allow conversion for most to pre-war levels, what are the ramifications for the government, Iraq, the military, investors and taxpayers? Also, what’s holding up the revaluation? Can Iraq handle it?

It does sound like a happy ending which makes me suspicious. How much tax revenue do U.S., state and local governments stand to collect? How many former and current military personnel and contractors stand to become millionaires overnight?

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OMG, markaldrich REALLY! ” The UST designed and printed the IQD ” I know delarue would take issue with you on that the United Kingdom company that did design and print the new dinar for Iraq. And the USA played no part in that whatsoever. Why you posted such nonsense is beyond me! Do a little research before you pretend to know what your talking about.

robralf, The proof came from George Bush Jr ” this war will pay for itself ” There is no other way it could other than future profit. Remember the bush family don’t do anything if there’s no profit in it. What he did not plan for was how long it would take. He didn’t estimate the new president to draw down Irq protection which did nothing more than prolong stability. I’d bet money on the table and say once the RV takes place then after that will come denomination removing three 0′s of the currency then it will float on the international monetary exchange at about 1 IQD to 1 $ That’s how I believe is going to go down but the key here is RV has to happen first and when it does that’s what George Bush Jr was stating it would enable the USA to pay off it’s national dept. I could be wrong I’m no expert we will have to see what happens. It’s no different than buying any other countries currency you buy it hold it and sell it or lose it. People go in to las vegas poor and come out richer some go in rich and come out poorer. your choice is your own, Why people go on and on about how it’s going to turn out how soon is it going to be. who knows what and why I say let it go it will be what it will be.

Ok… this took about 5 minutes to prove a scam. A quick internet search shows that Iraq has 30 Trillion dinar in circulation. All the cash in circulation for the whole world right now is only about $5 Trillion worth. So… do you really think war torn dirt poor Iraq is going value $30 trillion dinar at $3 per dinar giving them $90 trillion worth of currency in circulation… or 18 times more than the rest of the world combined. Good job… I bet Forbes is proud of this blog.

If currencys of the world are peged to assets and resources of a country, as the trend now seems to be, why can” the Iraq dinar be worth more than at present since they have 2nd amount oil in the world?

leonidas, again, Iraq’s Dinar is worthless as far as most are concerned, I’ll sell you a coke for 1000 dinar…does that give you a hint on why they have 30 trillion in circulation? And as far as the other thoughts of how much cash is in circulation by the whole world, that 5 trillion, are we talking hard currency, or electronic currency? Because I can show you this article which talks about the US loaning 16 trillion to other governments! http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

Go to DollarDaze… they have some good charts with global money supply. They break it down with currency in circulation, m1, m2 and so on. The $5 trillion amount is hard currency. You are wrong about the dinar having no value. The denominations they have in circulation are equivalent to the denominations we in the US have with the exception of the $100 dollar bill. Their’s just have 3 more zeros than ours. That’s why they have a plan to delete 3 zeros. How about this. Kuwait has only 1 billion dinar in ciic. So they have $3.5 billion worth of dinar. Iraq has 30 Trillion dinar in circ, that’s $25 billion worth of dinar. So the Iraqi dinar has 8.5 times more value than the Kuwaiti dinar when looked at that way. Still think it’s worthless?

All the cash in circulation for the whole world right now is only about $5 Trillion worth. Are you from pluto! The US dept alone was 15 trillion when you posted this. war torn dirt poor Iraq first part true second part Iraq has the world’s second largest oil reserves plus unknown minerals infact so much that no accounting has been done. look up phosphorus then what it’s used for and which country has the most. ! Yes Iraq. Iraq is going to be the new Dubai given 15 to twenty years.

Good comments thanks. If Leonidas is right – and his logic seems pretty good here – it makes sense that investor’s expectations are wildly out of whack. Again, I said I always thought it was a scam and too good to be true. Either way, investors in the Iraqi Dinar need tax answers. Notice, I wrote in my blog about tax loss treatment too. If there is revaluation, I wonder what Leonidas thinks the conversion rate might be – above or below what people are paying for the Dinar now.